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OIL AND GAS SERVICE Isaac Nelson Andrie Lesmana Greg Alexander Wilson Xiao

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Overview Precision Drilling Trust Transocean Inc. Major Drilling Group

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Oilfield Services Provide 45% of the industry revenue Prepare wells for production Maintain and enhance output Exploration Contract Drilling Provide 35% of the industry revenue Among the first on the scene Get contracts from big oil companies Specialize in drilling Employ trained staff

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Value Chain Oil & Gas Industry Upstream: Exploration Production Downstream: Refining Distribution Marketing

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Overview

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Terminology Directional Drilling

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Onshore Drilling

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Deep Water Drilling

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Jackups Midwater Semisubmersible Drillship Deepwater Semisubmersible Floaters Fleet

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Jack Ups Mobile self-elevating drilling platforms. Equipped with legs that are lowered to the ocean floor for foundation. Jacked up above highest waves. Suited for water depths of 400 ft and less.

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Drillships Self-propelled and extremely mobile. Dynamically positioned (High-spec only), does not require anchors. Great load capacity, ideal for remote locations. Limited to calmer water conditions. Dual-activity technology (on recent models). Midwater, Deepwater, Ultra-deepwater

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Semisubmersibles

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Contract Drillers Transocean Ltd. Deepwater drilling Precision Drilling Trust Onshore drilling Directional drilling Major Drilling Corp. Onshore drilling Directional drilling

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Competitive Landscape Capital-intensive, Highly Skilled, Highly Regulated Bounded by federal, provinces, state, foreign and local laws. OPEC - Control 75% of the worlds proven reserves and account for 33.3% of the oil production

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Proven Oil Reserves www.bp.com

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Proven Crude Oil Reserves

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Proven Natural Gas Reserves

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Oil Production By Country

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Competitive Landscape Biofuel Unconventional fossil fuel Oil shale and oil sand Crude oil and natural gas relationship Estimated to be 1.57 trillion barrels How to get all that oil out? Oil sands are a mixture of bitumen, carbon-rich sludge, sand, water, and clay. The majority of oil still will come from conventional extraction methods in the foreseeable future. Canada Oil sands

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Crude Oil and Natural Gas

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Oil and Gas Price Volatility

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Rotary Rig Count The rotary rig count is the average number of drilling rigs actively exploring for oil and gas. Rig count is one of the primary measures of the health of the exploration segment. It is a measure of the oil & gas industrys confidence in its own future.

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Precision Drilling Trust

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Stock Price Snap Shot Traded on NYSE under ticker PDS Mkt cap: 2.05B # of units: 275.52M Full-time employees: 7,200 Number of trust units outstanding: 275.64M

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5-yr Stock Price Snap Shot

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5-yr Stock vs. S&P/TSX Capped Energy Trust Index

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5-yr vs. S&P/TSX Index

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1-yr Stock Price Snap Shot

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1-yr Stock vs. S&P/TSX Capped Energy Trust Index

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1-yr vs. S&P/TSX Index

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Company Info

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History Founded as a private land drilling contractor in Canada in 1951. Entered a period of high-growth in the 1980s. Diversification era of 1990s. Conversion into an open-ended income trust in 2005 Changed focus towards organic growth and global expansion.

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Business Onshore contract driller - one of the largest onshore drilling rig fleets in the world. Second largest contract driller in North America. Holds about 26% of the onshore drilling rig market in Canada, 7% in the US and about 20% of the Canadian service rig market. Precisions fleet can drill virtually all types of onshore conventional and unconventional oil and natural gas wells in North America.

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Business

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Vision: Precision will be recognized as the high performance, high value provider of services for global energy exploration and development Precision delivers high performance through passionate people supported by superior systems and equipment designed to maximize and reduce risks; and Precision creates high value by lowering customer costs, operating safely, developing people, generating financial growth and attracting investment. Precision provides contract drilling, well servicing and strategic support services to customers. Precision supplies on-the-ground expertise - people, equipment and knowledge - to provide value to our customers on a daily basis.

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Business units Precision Drilling Trust Contract Drilling Services Precision Drilling LRG Catering Rostel Industries Columbia Oilfield Supply Grey Wolf Supply Completion and Production Services Precision Well Servicing Live Well Servicing Precision Rentals Terra Water Systems

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Business units On average, the contract drilling segment generates 70% of the revenue, and the completion and production segment generates the remaining 30%.

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Management Doug Strong Chief Financial Officer Background: Bachelor of Commerce degree from University of Calgary. Chartered Accountant. Previous positions: Spent 6 years in public accounting after earning his degree before joining a contract drilling company as International Controller. Joined Cactus Drilling as Controller in 1994, which was later acquired by Precision. Became Chief Financial Officer on November 7, 2005.

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Management Robert L. Phillips Chairman of the Board Previous positions: President and Chief Executive Officer of Dreco Energy Services Ltd. (1994 1998). President and Chief Executive Officer of PTI Group Inc. (1998 1999). Executive Vice President at MacMillan Bloedel Limited (1999 2001). President and Chief Executive Officer of BCR Group of Companies (2001 to 2004). Appointed as a Director of Precision in May 2004. Appointed as Chairman of the Board of Directors in August 2007.

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External risks Seasonality Activity level is highly seasonal and dependent upon the severity and duration of winter months. Typically, Q1 has the highest activity level and therefore the most prosperous as winter ground conditions are suitable for moving equipments to otherwise inaccessible drilling sites.

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Muskeg Summer: Winter:

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External risks Energy prices Typically when energy prices are high, demand for Precisions services increases. Markets for oil and NG are becoming more separate.

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External risks Weak overall demand for oilfield services in North America due to: Uncertain capital markets Uncertainty regarding future natural gas prices Weak USD

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Performance - Contract Drilling 24.5%24.9% 23.523.3 24.9 21.3 24.5%24.9% 24.3 23.0 26.6 24.7 5.93%1.21%

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Performance Precision currently has 213 rigs out of 352 operating (60.5%) 133 in Canada, 78 in US, 2 in Mexico. Improvement over Q3: 106 rigs active out of 390 (27.2%) Expects to have 75 rigs active in North America under term contract in Q1 2010, and 71 in Q2. For 2010, Precision expects 34 rigs in Canada under term contract, 31 in US, and 1 in Mexico. For 2011, Precision expects 19 rigs in Canada under existing term contracts, and 17 in US.

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Strategy Precisions high performance, high value strategy is focused on best people, best equipment and best technology to deliver value, diversification and growth. Growth: Globalizing its business and pursuing opportunities outside Canada Invest in asset growth that generates value for customers Continue developing its directional drilling market Diversification: Developing a broad customer base, and at the same time complementing its core business Expanding to market outside Canada to reduce seasonality effect and capitalize on drilling opportunities beyond WCSB (unconventional natural gas wells)

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Strategy Value High-degree of vertical integration allows Precision to reduce costs and improve margins, attract investment capital Reputation is evident in financial and operational performance, employee retention, safety and environmental performance, and market share in directional drilling and horizontal applications Target Zero Rec. Frequency = # of injuries x 200,000 Man hours worked

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Future Precision is expecting an improvement in the market demand for drilling rigs as the global economy improves. They will be reporting their financial results in accordance with IFRS starting Jan 2011. Conversion from Trust to Corporation. Estimated to be completed by May 2010.

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Financial Statements

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Consolidated Balance sheet

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Statements of Earnings and Retained Earnings

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Segment Review of Contract Drilling Services

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Segment Review of Completion and Production Services

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Statements of Cash Flow FCF = 311,294K

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Fisher analysis Superiority in production, marketing, research and financial skills People factor Investment characteristics of some businesses Price of the investment

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Recommendation $ Buy $ EIA short term forecast for Henry Hub natural gas average spot price in 2010 is $5.17 per MMBtu ($1.22 increase over 2009), $5.65 in 2011. Crude oil is expected to rise to $82 per barrel by the end of the year, and hitting $85 per barrel by 2011. Oil and gas consumption will be tied to the state of the global economy. The faster the economic recovery, the faster we can see oil and gas consumption increase.

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Worlds largest provider of offshore contract drilling services for oil and gas wells Our mission is to be the premier offshore drilling company providing worldwide rig- based, well-construction services to our customers through the integration of motivated people, quality equipment and innovative technology, with a particular focus on technically demanding environments.

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Provides: oil and gas drilling management services, engineering, and project management services. Contract out drilling rigs, equipment and work crews to drill oil and gas wells. Participates in oil and gas exploration, and production activities. focuses on deepwater and harsh environment drilling services. Business model

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1 year Rig

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5 year Rig

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Rig 10 year

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Price of Rig to Price of Crude Oil

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Management Steven L. Newman President and Chief Executive Officer Before beginning his current position in March 2010, Mr. Newman served as President and Chief Operating Officer from mid-2008 to late 2009 and subsequently as President. Mr. Newmans prior senior management roles included Executive Vice President of Performance, Executive Vice President and Chief Operating Officer, Senior Vice President of Human Resources, Information Process Solutions, and Treasury, and Vice President of Performance and Technology. He also has served as Regional Manager for the Asia and Australia Region and in international field and operations management positions, including Project Engineer, Rig Manager, Division Manager, Region Marketing Manager and Region Operations Manager. He joined the company in 1994 in the Corporate Planning Department. Mr. Newman holds a Bachelor of Science degree in Petroleum Engineering from the Colorado School of Mines and an MBA from the Harvard University Graduate School of Business

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Management Ricardo H. Rosa Senior Vice President and CFO Before being named to his current position, Mr. Rosa served in management positions, including Senior Vice President of the company's Europe and African Unit, Senior Vice President of the Asia and Pacific Unit (APU), Vice President and Controller and in a variety of international positions in finance for 19 years. Mr. Rosa graduated from Oxford University in the United Kingdom with a Master of Arts degree and subsequently qualified as a Chartered Accountant with the Institute of Chartered Accountants in England and Wales.

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Management Eric B. Brown Senior Vice President, General Counsel Mr. Brown served as Vice President and General Counsel since February 1995 and Corporate Secretary since September 1995. He was named a Senior Vice President in February 2001. Prior to assuming his duties with the company, Mr. Brown worked at Coastal Gas Marketing Company and served as its General Counsel. He earned a Bachelor of Arts degree from Hope College in Michigan and a J.D. degree from Indiana University law school.

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Firsts and Records

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History of Mergers Transocean Global SantaFe Global MarineSanta Fe IntlTransocean Transocean Sedco Forex Transocean Offshore Transocean ASA Offshore Drilling Southern Productions Southern National Gas Dacinger International Drilling Sedco ForexSedcoForex NeptuneR&B Falcon

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History 1964 Global Marine first to drill in North Sea. 1966 The Offshore Company designs jackup with year-round capabilities. 1969 First semisubmersible rig built by Forex Neptune. 1985 Schlumberger combines Sedco and Forex into single company. 1986-1992 Global Marine files for Ch. 11 bankruptcy. Reemerges in 1989 with BOD, management and fleet intact; deleveraged by 1992. 1996 The Offshore Company (now called SODI) acquires Transocean ANA, doubling its fleet size.

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History 1999 Transocean Offshore merges with Sedco Forex (sold by Schlumberger). 2001 Transocean Sedco Forex merges with R&B Falcon Corp. and form worlds largest offshore drilling company. Santa Fe Intl and Global Marine merge and form worlds second largest drilling company. 2003-2007 Transocean breaks several records for depth drilling (10,000 ft of water) and well depth (35,000 ft). 2007 Transocean and GlobalSantaFe merge to become the worlds largest offshore driller. 2008 Moves to Switzerland from Cayman Islands for geographic centrality and tax benefits.

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Major Clients

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Worldwide operations

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Jackups Midwater Semisubmersible Drillship Deepwater Semisubmersible Floaters Fleet

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Mobile self-elevating drilling platforms. Equipped with legs that are lowered to the ocean floor for foundation. Jacked up just above highest waves. Suited for water depths of 400 ft and less. Jack ups

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Fleet Dynamically positioned in that it does not require anchors. Great load capacity, ideal for remote locations. Limited to calmer water conditions. Self-propelled and extremely mobile. Dual-activity technology (on recent models). Midwater, Deepwater, Ultra-deepwater Drill ships

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Fleet Floating vessels that can be submerged by water ballast system so that lower hulls are under water during drilling operations. Maintain position through anchors or computer controlled dynamic positioning thrusters. Moved by propellers or tugging. Suited for rough water conditions. Midwater, Deepwater, Ultra-deepwater Semisubmersibles

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Financial Statements

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Operating Revenues and Long-Lived Assets by Country

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Recommendation BUY

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The Company is well positioned to face the challenges and opportunities ahead

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Based in Moncton, New Brunswick, Canada One of the worlds largest drilling service companies serving the mining industry It maintains field operations and offices in Canada, the United States, South and Central America, Asia, Africa and Australia. Major Drilling provides all types of drilling services including surface and underground coring, directional, reverse circulation, RAB, geotechnical, environmental, water-well and coal-bed methane and shallow gas. About MDI

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Stock Quote Current Price as of Mar 19, 2010 24.60 Day low24.41 Day high25.63 Volume111,308 Market Cap583.51M EPS-0.37 P/EN/A Forward P/E20.28 Annual Dividend0.40 Yield1.60 Beta2.01 Source from www.theglobeandmail.com/

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1 Year Chart

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5 Year Chart

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5 year MDI vs. Oil & Gas Index

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Corporate Strategy Dominate specialized drilling and expand effective capacity Modernize conventional fleet Keep debts at minimum levels Be the best of class in safety and human resources

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Services

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Specialized drilling Defined as any drilling project that, by virtue of its scope, technical complexity or location, creates significant barriers to entry for smaller drilling companies It includes deep-hole drilling, directional drilling, and mobilizations to remote locations or high altitudes

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Conventional drilling It is much more affected by the industry cycle This part of the industry is highly fragmented and has numerous competitors Since MDI offers only limited differentiation in this sector, it is not its priority for investment

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Underground Drilling It takes on greater importance in the latter stages of the mining cycle as clients develop underground mines Growth is relatively flat

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Acquisitions-1 Forage Diamant Benot Lte Based in Val-dOr, Qubec Acquired on August 1, 2008 Acquired 19 drills rigs It fits with MDIs strategic focus on specialized drilling Purchase price was CDN$23.1 million, financed by cash and debt

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Acquisitions -1

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Acquisitions -2 Paragon del Ecuador S.A. Acquired On October 25, 2007 It was the largest mineral exploration drilling contractor in Ecuador Acquired 7 drill rigs Purchase price was CDN$ 5.8 million, financd with cash and debt

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Acquisition -2

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Acquisitions -3 Harris y Cia Ltda. On September 1, 2007 Acquired 11 drill rigs conducting mainly specialized drilling in Chile Also acquired Harris existing contracts and retained key management personnel Purchase price was CDN$25.2 million, financed with cash.

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Acquisition -3

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Drilling Operations in the world Acquisition- 1 Acquisition- 2 Acquisition- 3

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Revenues by Areas

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Top management Francis P. McGuire Director, President & Chief Executive Officer served as Vice President, Business Development of MITI Information Technology Inc. from 1998 to August 2000 served as Deputy Minister of the Department of Economic Development and Tourism of New Brunswick. He holds a Masters of Arts in International Studies, Trade and Economics from Johns Hopkins University, a diploma in European Politics from the Institut d'Etudes Politiques in Paris and a Bachelor of Arts from Dalhousie University.

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Top management Denis Larocque Chief Financial Officer He was involved in the acquisition and branch office setup in countries like Australia, Argentina, Chile, Mongolia and many more. Prior to joining Major Drilling in September 1994, Mr. Larocque worked for an accounting firm affiliated with BDO Dunwoody. Mr. Larocque is a Chartered Accountant and holds a Bachelor of Business Administration, major in Accounting from Laval University.

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Top management Robert Morgan V.P. - Business Development and Latin American Operations Bachelor of Science degree Rob Newburn V.P.- North American and African Operations Ray Baldry V.P.- Australian and Asian Operations

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Financial Statements

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Consolidated Statements of Operations

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Consolidated statements

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Consolidated Balance Sheets

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Consolidated Statements of Cash Flows

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Notes to Consolidated Financial Statements

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Foreign Currency Risks

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Historical Summary

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Recommendation Buy In the long run, mining companies continue to deplete the more easily accessible mineral reserves around the world and attractive deposits will be in increasingly remote locations, areas difficult to access and/or deep in the ground Excellent financial position and remained debt-free, net of cash With rising rig utilization levels industry-wide, its contract pricing power will return in the near future.